Where should development of this feature continue? It seems like both the Masquerade and Masquerade Extras projects are assuming the other will implement the feature. This seems has been closed in the Masquerade Extras project and marked as a duplicate of this issue.

@citricguy
That's not quite the case.
The Masquerade module needs to fire the basic hooks necessary for rules to work. Otherwise, the rest of this is not possible.
(For example: module_invoke("masquerade_start")). This thread already suggests the basics for what would be required. #1547058: Add hooks when user starts or stops masquerading

My original suggestion was wrong because rules integration would be coupled to masquerade with hooks specific to rules.
All masquerade_extras would supply is the hooks/events that would be useful to rules.

Whether or not Masquerade's maintainers want that integration in this suite or elsewhere is up to them.